Career Development Plan

Lolita L. Ransom

University of Phoenix

Human Capital Management HRM/531

Rosie DeCosmo, Ph.D.

Week#5

Career Development Plan: Part IV

April 12, 2010

Compensation consists of money earned for hours worked, motivation for outstanding service, and indirect perks that organizations give their employees in an effort to maintain a relationship with them. Together, these elements make up the compensation that employees receive for the work they do for the organization.

DIRECT COMPENSATION: BASE PAY AND INCENTIVES

Base pay is the wages and salaries employees receive in exchange for performing their jobs. (Griffin, 2003) Base pay rates are determined by economic forces in the labor market, by competitor wages, and, in unionized firms, by negotiation. In most noncommissioned jobs, base pay represents the majority of the compensation an employee receives.

To attract, retain, and motivate employees, however, many organizations offer compensation beyond base pay in the form of incentives such as bonuses, commissions, and profit-sharing plans. These incentives are designed to encourage employees to produce results beyond expected performance norms. Today, in an effort to improve the quality of products and services, many organizations are experimenting with various incentive plans to reward employees who contribute toward meeting the quality goals of the organization.

INDIRECT COMPENSATION: BENEFITS

Benefits, a more indirect type of compensation, are payments beyond wages or salaries that are given to employees as a reward for organizational membership. Benefits can be categorized into several types: required and voluntary security, retirement, time-off, insurance and financial, and social and recreational. (Griffin, 2003)

Organizations commonly provide health, dental, disability, and life insurance coverage for employees and sometimes for their families. The costs of these plans may be paid entirely by the company or...